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Condominium Development 101

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1 Condominium Development 101
Tammy Evans Marc Kemerer Adil Darr September 14, BILD Member Presentation

2 Over 56% of all new construction in Ontario
Over 10,000 existing registered condominiums across Ontario Creating over 700,000 condominium units

3 Legislative Regime Governing Condominium Development
1. Condominium Act, 1998 Protecting Condominium Owners Act, 2015 (in force by Royal Assent Dec. 3, 2015, but Schedules 1 and 2 not yet proclaimed) Condominium Management Services Act, 2015 2. Planning Act 3. Ontario New Home Warranties Plan Act 4. Land Titles Act/Registry Act 5. Construction Lien Act

4 1. Condominium Act, 1998/Reform Legislation
Purpose of the Act/Reform increased consumer protection sets up minimum standards for condominium development accommodates different forms of condominium development mandates certain requirements through the life span of a condominium - from first sale through construction completion and operation

5 mandated disclosure of key details that impact decision to purchase
provides clarity for purchasers, ease of reference in standardized format of disclosure balancing act: consumer protection within fairly open market, not intended to unduly interfere in the marketplace, but to address areas of concern

6 Structure of the Act Part II - mandated contents for written and plan description of project - physical and operational design, services, restrictions and permissions (s.7 and s.8) to create a condo Part IV – condominium corporation setup authority Part V – Mandatory disclosure requirement for sale/lease of units what documentation need to go to market? 10 day cooling off – right of rescission for purchaser (calendar) days from later of receipt of (a) disclosure statement and (b) fully executed agreement of purchase and sale (s.73)

7 Budget statement for first year of operation (s.72(6))
material change – s.74 – “a change or series of changes that a reasonable purchaser on an objective basis would have regarded sufficiently important to his decision to purchase” – ie. would not have purchased revised disclosure or “notice” to be delivered within a reasonable time or clock starts when purchaser became aware obligation to complete the project and turn it over to unit owners (s.78)

8 Part IX - enforcement/self help
Part VI – operation, collection/use of common expenses, reserve fund, repair and maintenance, changes, insurance Part IX - enforcement/self help mandatory mediation and arbitration for certain disputes (s.132) court application to appoint inspector (s.130) or administrator (s.131) compliance order (s.134) oppression remedy (s.135) administrative fine/penalty (s.137) max $100,000 corporate/$25,000 individual Note: Reform amendments coming for dispute resolution process

9 Hierarchy of Regulation of Condominium Developments
The Act, Reform legislation and regulations and all other applicable statutory requirements (and the courts) registered declaration and condominium plans (description) registered condominium bylaws any registered agreements (as authorized by bylaw or in the declaration, s.98 Agreements) condominium Rules

10 Compliance and Enforcement
duty of care - Board of Directors and officers held to statutory duty of care in exercising duty to manage affairs of the condominium (s.37) compliance order – any condominium corporation/owner/ mortgagee/occupant has authority to enforce compliance through the courts (or presumably Condo Authority, when in place and operational) with the Act, declaration, bylaws, rules, shared facilities agreement (provided mandatory mediation and arbitrator is exhausted first, where applicable) (s.134) Act prevails – cannot contract out of the Act (s. 176)

11 “Condominium Documents” or “Disclosure Book”
Index Table of Contents (to Disclosure Statement) Disclosure Statement 1st year Budget and Schedule of Monthly Common Expenses Proposed (or registered) Declaration Proposed (or registered) Bylaws Proposed (or actual) Rules Proposed (or actual) Insurance Trust Agreement (if any) Proposed (or actual) Condominium Management Agreement Proposed (or registered) Reciprocal Agreement Proposed Agreement and Undertaking (if any) Proposed building footprint/site plan/floor plates (recommended)

12 Documentation that legally creates the condominium
Declaration Written description of the project Contents mandated by s.7 of the Act and O. Reg. 48/01, s.5 Mandated schedules A - legal description of the lands and easements necessary for operation/access/support B - mortgagees’ consent to registration C – description of unit boundaries D - each unit percentage of common interest in the whole E - common expenses breakdown F – description of exclusive use areas G – confirmation of completion of minimum requirements for construction completion (architect and/or engineer sign) (see also O.Reg 48/01, s.5(8) and s. 6) H, I, J, K, L- as necessary for alternative condo forms

13 Description (aka: the condominium plans)
contents mandated by the Act (s.8) and Reg 48/01, s.9 describes by drawing boundaries of units and extent of common elements of the condominium property What to ensure is included from developer’s perspective: consistency with planning approvals – eg. connections to public road, access points, zoning/site plan compliance, parking and locker requirements, bicycle parking, easements, etc. extent and relationship of boundaries to neighbour property/unit (particularly important for mixed use projects) updated from architectural changes (working drawings) along the way (always keep surveyor up to date with architectural changes)

14 What do I need to go to market?
an experienced primary project team! architect surveyor condominium manager condominium lawyer marketing/sales professionals construction (lead general contractor/construction manager) site specific consultant: eg. heritage/environmental/traffic master form Agreement of Purchase and Sale (incentives/other schedules) Disclosure Book/Condominium Documents registration of Vendor and Builder and project enrolled with Tarion (conversion projects to come in future)

15 Steps to Registration Lands in Land Titles Absolute Plus and construction substantially completed development applications (site plan, s.37, development agreement) in place and Draft Plan of Condominium Approval (DPA) issued, environmental, groundwater discharge issue addressed (Toronto) clearance of site plan/development agreement/DPA conditions grant/creation of any servicing or other easements required final measure by surveyor preparation of “as built” drawings occupancy permits issued LRO preapproval of condominium plans/declaration (separate process) architect/engineer sign off Schedule “G” to declaration submission to LRO for registration

16 Alternative Forms of Condominium
Non-Residential /Mixed Use /Stacked/Hybrid Uses Common Element Condominium (Part X) (includes freehold parcels of tied land (POTL)) Phased Condominiums (Part XI) Vacant Land Condominiums (Part XII) Leasehold Condominium (Part XIII) Condominium Conversions protection of tenancy rights (s.4(2) and s.4(3)) watch for local policies and restrictions coming soon under certain Tarion warranties

17 SAMPLE: Vacant Land Condo

18 SAMPLE: Common Element Condo

19 Strata Plans What are they and when must these be used?
used to define the extent of a particular component (both horizontally and vertically) and easements three dimensional plans illustrates both horizontal and vertical layers needed where carving up space both vertically and horizontally (e.g. stacked mixed use with shared building servicing areas) and to illustrate and describe shared use areas

20 assists in describing by drawing the extent of the ownership/easement part on the plan
best to define via physical/structural – eg: face of wall; centreline component of floor operational considerations: servicing agent doesn’t care when the legal part ends control vs. use shared facilities cost allocation impact Reform changes to come

21 SAMPLE: CONDO STRATA PLAN

22

23

24 Important Obligations to Note
Agreement of purchase and sale is not binding if disclosure does not comply with Act’s requirements obligation to notify purchasers of material change rescission right arises for material change – whether notice provided or not declarant on the hook for first year budget deficit – make budget reasonable developer obliged to proceed diligently to registration and closing Tarion addendum and Statement of Critical Dates mandatory and to be updated post roof completion to firm occupancy date form (watch use of early termination conditions) watch Tarion notice requirements – insufficient notice triggers compensation to purchaser – eg. strike delay notices

25 Condominium Reform Two new statutes:
1. Protecting Condominium Owners Act, 2015 (PCOA) (Schedule 1) omnibus-type bill in force by Royal Assent Dec. 3, 2015 Schedules 1 and 2 not yet in force (requires proclamation) amendments to Condominium Act, 1998 and various other statutes establishes Condominium Authority to oversee education, dispute resolution, condominium registry governs disputes primarily between condo boards and owners

26 2. Schedule 2 to PCOA – Condominium Management Services Act,
2. Schedule 2 to PCOA – Condominium Management Services Act, (CMSA) not yet in force – requires proclamation establishes licencing authority (Condominium Management Licencing Authority) to administer CMSA licencing and regulation of property managers and property management providers both Condominium Authority and Licencing Authority will be provincial administrative authorities – not for profit, self funded (after initial startup) independent from Province, but oversight by Auditor General

27 Robin Dafoe recently named as interim executive leader of both Condominium and Licencing Authorities
Status of Legislature (regulatory drafting) Status of governance structure and appointments

28 Planning Act Planning Context Policy/legislative framework
Planning instruments and new condominiums Planning instruments and condo conversions Conclusions on planning instruments

29 Context differentiate condominiums from other developments by their specific tenure still developments shaped by land use planning considerations from the outset approach the development as would any other development, ensuring compliance with the hierarchy of planning instruments: provincial statutes/policies followed by local official plans, zoning standards and site plan requirements make sure all applications are complete

30 municipality will be looking to obtain benefits from the development (parkland dedications, road widenings, s. 37 benefits) and servicing improvements necessary for the development carefully review conditions of draft plan approval and other development approvals conversions – are there official plan policies in effect that regulate/restrict conversions? key = ensure that all municipal demands/requirements are reasonable (related to the development) and within the jurisdiction of the municipality

31 Policy/Legislative Framework
the creation of a condominium involves two types: new construction or conversion of an existing building different standards in terms of which planning instruments may apply to understand the planning requirements behind condominium creation need to review together the Planning Act and the Condominium Act, 1998

32 Provincial Interest s. 2: decisions need to have regard for matters of provincial interest set out in Planning Act (conservation of resources, full range of housing, protection of public health and safety, etc.) s. 3: decisions need to be consistent with the Provincial Policy Statement policies

33 Provincial Policy Statement 2014 (PPS)
policy 1.4, Housing, is the main policy that applies with respect to the creation of residential condominiums requires the provision of a range of housing types and particularly the provision of affordable housing is your development consistent with this goal? is it consistent with other policies i.e. intensification (1.1.13), the use of existing infrastructure (1.6)

34 Official Plan/Zoning Conformity
s. 9(3) Condominium Act, 1998: a description cannot be registered without the approval of the approval authority condominium proposal must meet current official plan policies and zoning performance standards basis for review no different than any other development application

35 Draft Plan of Condominium
s.50 of Planning Act establishes a general prohibition on subdivision of land except by consent or through an exemption s.9 of Condominium Act, 1998, states that s.50 of the Planning Act does not apply to dealings with whole units (and their common interests) in condominiums

36 draft condominium plans are subject to sections 51, 51
draft condominium plans are subject to sections 51, 51.1 and 52 plan of subdivision provisions (9(2) of the Condominium Act, 1998) s.51(17) provision of draft plans s.51(24) criteria: regard must be had to conformity with official plan and effect on matters of provincial interest

37 s.51(25) provides the approval authority with the ability to impose conditions on the approval of a plan of condominium conditions are to be “reasonable”, having regard to the nature of the development specific conditions include parkland and highway/right-of way dedications

38 s. 41 sets out the conditions that can be requested through site plan control
additional layer of regulation often required through draft plan approval s. 41(4) required to provide drawing/plans s. 41(7) conditions of approval: loading, parks, grading, landscaping, maintenance etc.

39 Planning Instruments and New Condominiums
Timing of compliance with zoning municipality will require compliance with zoning prior to final approval degree of risk in proceeding from the start with a condominium application will depend on support for proposal recommended to seek necessary zoning approvals first prior to filing an application for condominium approval does not preclude preparing the plan of condominium application or going to market

40 Timing of compliance with site plan
the same scenario applies to the site plan as to zoning by-law compliance typically required to fulfill site plan conditions as part of the draft plan approval compliance with the site plan itself will have to occur prior to registration as the building will have been built before registration of the condominium occurs

41 Section 37 Benefits Municipality may require the provision of “facilities, services of matters” in exchange for approving increases in height and density Have to have an official plan policy in effect relating to such authorization Large, tall condominium buildings a perfect target for such “let’s make a deal” planning very political and can involve large sums

42 OMB (generally): should have a real and demonstrable connection between the public benefits and the planning approvals Look at what the impact is and the resulting needs, streetscape improvements, local pool and park upgrades: 45 Charles St E, Toronto Ensure that the “ask” is related to the development and reasonable (unless politics is more practical)

43 New approaches to condominium development: parking
426 University Avenue, City of Toronto: developer proposed no parking for a condominium building with 315 units located on a major arterial route well served by transit staff recommended refusal but Council approved project with nine parking spaces

44 Larger units – OPA Toronto Official Plan Amendment to Encourage Development of Units for Households with Children City staff recommended OPA to: include the term “dwelling units suitable for households with children” in official plan policies requiring the provision of a full range of housing; and introduce a new area specific policy to require that any new downtown developments containing 100 or more dwelling units construct 10% of those units as dwelling units containing three or more bedrooms (may contain less than three bedrooms if constructed in such a manner that they can be converted to three or more bedrooms)

45 Proposed OPA met with considerable opposition from the development sector on the basis that:
there is no market demand for such units, and they are not affordable for average families with children While OPA has not been adopted, the policy objective is being realized through the approvals process as part of the negotiations process – not actively resisted by developers

46 4. TTC Metropass Program required developers to provide TTC Metropass to first occupants for one year in designated growth areas In face of overwhelming objection by the development industry (BILD), City Council rescinded the program did not meet objective of promoting transit and was arguably illegal

47 Municipal Draft Plan Approval Requirements
Standard conditions vs. site specific conditions Typical standard conditions: based on type of condominium (standard, phased, common element, commercial, mixed use, conversion) fulfillment of site plan/development agreement requirements Road dedications complete clearance from utilities, Canada Post clearance from school boards (as applicable)

48 Site specific conditions (flows from planning review):
based on demand on and proximity to public roads, conservation areas, site servicing, transit, schools, traffic environmental assessments (Phase One and Phase Two ESA, Record of Site Condition) Heritage requirements restrictions, purchaser warning statements

49 Planning Instruments and Condo Conversions Case Law
OMB: to be granted weight, a conversion policy must be part of the official plan policies Critical to municipalities is protection of rental units – tied to CMHC vacancy rate Courts: look at the purpose and wording of the official plan policies on conversion - a municipality is entitled to include the adequate supply of rental housing in such policies Are there policies on meeting current zoning standards - OMB dismissed a condominium conversion proposal in Windsor on the basis that the proposed parking was inadequate for the conversion per the Official Plan policies

50 Compliance with updated zoning regulations
given that there is no change in use, but only a change in tenure, arguably the development will be grandfathered in terms of the zoning standards will likely depend on the individual application: are any changes proposed to the development that trigger the requirement for current standards do the condominium conversion policies require such compliance (Burlington Official Plan policy 2.3.2(f)(ii))?

51 such Official Plan policies provide a reasonable basis for the requirement
focus of municipal policies, if any, generally on housing policy (i.e. vacancy rates) rather than built form, which may limit the ability to require compliance to updated zoning regulations

52 Compliance with updated site plan
an interesting question since site plan relates to the “usability” of the site (s. 41 of the Planning Act) a case can be made that the change in tenure will result in an increased use of the site (owners have higher rates of car ownership, etc.) may therefore have to be considered on a case by case basis does the wording of municipal conversion policies address this issue?

53 Municipal Act, 2001 s allows a municipality to pass by-laws to prohibit/regulate the demolition/conversion of residential rental properties rarely used, but a potential source of leverage for municipalities City of Toronto Municipal Code Chapter 667, Residential Rental Property Demolition and Conversion Control Barrie has been considering such a by-law

54 Conclusions on Planning Instruments
approach condominiums as with any other development ensure compliance with Official Plan policies, zoning standards and site plan requirements or that compliance can be obtained through the approvals process be wary of what the municipality is seeking as conditions of approval, ensure the benefits requested are reasonable and within the jurisdiction of the municipality

55 Ontario New Home Warranties Plan Act (TARION)
regulates all new home construction in Ontario all builders and vendors must be registered (s.6) vendor and builder responsible for warranties mandates construction completion, inspection and reporting requirements/standards Construction Performance Guidelines, Bulletin 19 Design and Field Review Reporting fit and finish guidelines without tolerances common elements Construction Performance Guidelines retain independent consultant to conduct Bulletin 19 inspection (for any Part 3 OBC Condo)

56 Tarion administers the warranties program
1, 2 and 7 year warranty for all new home construction all condominium units must be enrolled with Tarion prior to excavation does not yet cover or regulate condominium conversions (changing in 2017) mandatory registration: posting of security to cover deposits construction completion warranties level of security based on risk assessment (BB 28)

57 Builder Bulletin 28 Assess technical ability Financial strength History of applicant Under review in 2016

58 A. Underwriting Guidelines
Builder Bulletin 28 scoring Size points Tenure points Business/Technical 20 points Financial Strength 50 points 100 points

59 B. Condominium Types Type A – Project falls under Part 9 of OBC and is a lot line condo Type B – Project falls under Part 9 of OBC and is not a lot line condo (eg. townhouses) Type C – Project falls under both Part 9 & Part 3 of the OBC (eg. stacked towns with underground parking, subject to Bulletin 19) Type D – Project falls under Part 3 of OBC (highrise - 4 floors and up, concrete construction)

60 C. Technical Assessment
For projects under Part 9 OBC - Builder Education core competencies required before application made for new registrations For projects where any component of project falls under Part 3 OBC - Tarion conducts meeting to assess technical ability

61 D. Type C/D Technical/Financial Assessment
Meeting with developer to assess financial and technical capabilities Review/discuss Budgets and financing (quality of lender, types of lenders) Assessment of project team (ie- in house or external parties) Review of Builder Bulletin 19

62 E. Conditions of Registration
Based on assessment, conditions imposed: Limit on size and complexity of projects type of security Builder being used for project (particularly for highrise) Financing Commitment required prior to construction

63 F. Security Requirements
Forms of security Surety Bond Letter of Credit Cash Deposit Trust Agreement (DTA)

64 G. Release of Security - General
Track record taken into consideration (number of conciliations, etc.) For first time Type C and D (i.e. Bulletin 19 projects) developer’s security is maintained for 2 years from condo registration For Type C and D developers with a track record security release we use the guidelines in Builder Bulletin 28

65 G. Release of Security - under BB 28
For all types security reduction is triggered when condo is registered and evidence of minimum of 50% title transfers are received Initial reduction is based on the risk assessment amount For types A and B (Part 9 OBC), a subsequent reduction occurs one year after condo registration For types C and D (Part 9 & Part 3), reduction can occur when Final BB 19 Report is received Will consider performance audit as well

66 H. Warranties - One-Year Warranty
Two sets of statutory warranties Unit warranties – starts from occupancy closing/date of possession common elements – starts from date of registration Warranties apply to: new construction “completed” think “bumper to bumper”, not just essential elements violations of OBC unauthorized substitutions Schedule C to Declaration is important here

67 H. Warranties - Two-Year Warranty
Provides protection against: Health & Safety violations of the Ontario Building Code Defects in the electrical, plumbing and heating distribution systems Defects allowing water penetration Defects in exterior cladding, balconies, bricks, siding derailment

68 H. Warranties – 7 Year Warranty
Protects against Major Structural Defects including: Defects in work or materials that result in the failure of a load bearing part of the Home’s structure, or materially and adversely affects its load bearing function; Defects in work or materials that significantly and adversely affect the use of the building as a home eg. mould – makes it unlivable - but must be a result of a defect in construction eg. plastic vents on furnaces lets in carbon monoxide eg. Dominion concrete foundations crumbling eg. wall cave in – 2nd floor ends up in basement

69 4. Land Titles Act/Registry Act
Different registration systems across Ontario (transition from paper system to automated, Registry and Land Titles) Regulates form and minimum content of documentation permitted to be registered/deposited for certification and reliance Underlying lands for condominium registration must be under Land Titles Absolute system (or Registry where no LTA) Condominiums must go through the land registry office pre-approval process before registration can occur LRO review of declaration and description for compliance with registration requirements should be 10 days max turn around with comments to lawyer/surveyor Municipality forwards signed description (condo plans) to LRO architectural and structural as builts go directly from surveyor to LRO; executed declaration and fees typically go directly from lawyer to LRO

70 5. Construction Lien Act s.33.1 Notice of Intended Registration of Condominium effective July 1, 2011 – do comply! requires “owner” to publish Notice in a construction trade newspaper before submission for (final) approval deadline to publish: no earlier than 5 days and no later than 15 days before submission of plans to Municipality for (final) approval intended to provide early notice to trade contractors prescribed form and contents (Form 24, O.Reg. 174/11) list of contractors who serviced the site in last 90 days imposes liability on owner to trade(s) with a valid lien who has suffered damages as a result of lack of proper notice

71 Recap: Legislative Regime Governing Condominium Developments
1. Condominium Act, 1998 and Reform Legislation (pending proclamation) 2. Planning Act 3. Ontario New Home Warranties Plan Act 4. Land Titles Act/Registry Act 5. Construction Lien Act

72 Useful Reference Materials:
Condominiums in Ontario: A Practical Analysis of the New Legislation, Herskowitz & Freedman (2001) The Condominium Act: A User’s Manual, Loeb (2010) Government of Ontario (Service Ontario) Land Registration Bulletins and Guidelines/ Checklists Tarion Website and Builder Bulletins Construction Performance Guidelines Builder Bulletins eg. Bulletin 19 Design & Field Review Reporting

73 Questions and Answers

74 Thank you for listening.
Tammy Evans Marc Kemerer Adil Darr


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